Swisse Wellness seals $1.67b pay day in vitamins frenzy

Vitamins group Swisse Wellness has been sold for a whopping $1.67 billion to Hong Kong-listed company Biostime, which outbid several rivals including Chinese private equity firm Hony Capital and Chinese drug manufacturer Shanghai Pharma.

The sale price represents an extraordinary turnaround in the fortunes of the business that has a heavy marketing budget with a calvacade of high-profile sports stars, actors and chefs fronting its ads including Nicole Kidman, former Australian Test cricket captain Ricky Ponting, fast bowler Mitchell Johnson, tennis player Lleyton Hewitt and Master Chef co-host George Calombaris.

The sale also delivers a substantial pay day for the founding Ring family and chief executive Radek Sali and his management team. Mr Sali and his management team, along with the Ring family will retain around 15 per cent to 20 per cent of the company after the transaction. The buyer was revealed first by The Australian Financial Review's Street Talk column on Thursday afternoon. The Ring family was the major shareholder.

Biostime, which was advised by HSBC on the transaction, is a specialist in infant formula and nutritional products for babies and wants to expand its reach into vitamins. It was founded in 1999 and has more than 200 sales offices across China.

The Swisse sale process has occurred at a time when demand for vitamins from China has been booming. Industry stalwart Blackmores has been a beneficiary and has experienced a five-fold increase in its share price in just 13 months, and hit a new record on Thursday on the ASX of $136.80, up 5 per cent on the day. Vitamins and sports nutrition firm Vitaco made its debut on the ASX on Wednesday and has gained 17 per cent in two days after a $232 million capital raising at an issue price of $2.10.

The Australian firms have ridden a wave of demand from Chinese consumers who have been buying up the trusted Australian brands for their "clean and green" image after a series of health scares in China involving locally-manufactured products including baby formula, berries and milk powder.

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The buy-up of Australian vitamins has come from both online shoppers in China through web sites such as Tmall and Alibaba, along with brisk trade from Chinese tourists and entrepreneurs in Australian chemist warehouses and supermarkets which have often left shelves sporting "out of stock" signs because of the unprecedented demand.

Swisse, which is chaired by former Foster's Group chief executive Trevor O'Hoy, has been investing heavily in brand-building and marketing but hit some strife in 2012 and 2013 after an aggressive foray into the United States, which didn't deliver the expected investment returns and drained its cash flow. But it has been able to recover strongly.

The Goldman Sachs Special Situations fund came in to bolster the Swisse balance sheet in August, 2013 with a $70 million injection and will also be a big beneficiary of the booming sale price.

The surging Chinese demand and a more focused management has enabled the business to stage an extraordinary turnaround with earnings now tracking at close to an annualised rate of $200 million, up from $2 million in 2013.